Calpine debtors' indenture trustee, lender agent seek appointment of trustee for CalGen

By Caroline Salls

Pittsburgh, Sept. 13 - Calpine Generating Co., LLC and CalGen Finance Corp.'s second-priority notes' indenture trustee and second-priority lender agent asked the U.S. Bankruptcy Court for the Southern District of New York to appoint a trustee to represent the companies' interests in Calpine Corp.'s Chapter 11 case, according to a Thursday court filing.

Specifically, the request was made by HSBC Bank USA, NA, the indenture trustee for Calpine Generating's $640 million second-priority secured floating-rate notes due 2010 and by The Bank of New York, administrative agent for CalGen Finance's $100 million principal amount of second-priority secured institutional term loans due 2010.

According to the motion, Calpine has proposed a Chapter 11 plan that seeks to substantively consolidate Calpine Generating, a highly solvent company, which recently sold $2.6 billion of debt to the public, with the various other Calpine debtors.

HSBC and The Bank of New York said Calpine's attempt to consolidate CalGen with the other debtors "represents a patent effort to appropriate the assets of CalGen for the benefit of Calpine and its creditors," contrary to the interests of CalGen and its creditors.

Meanwhile, the motion said all of the professionals in this case are representing the interests of Calpine, not CalGen, "and all have clear conflicts of interest."

The motion said CalGen is a separate, solvent company.

"Although CalGen has more than sufficient assets to pay its creditors in full, and CalGen has sold billions of dollars of debt to public investors on the expectation that they could look to CalGen for payment of their claims before CalGen's assets were used to pay creditors of other entities, the debtors' proposed plan seeks to utilize CalGen's assets to benefit creditors of other debtor entities," the motion said.

In addition, HSBC and The Bank of New York said Calpine is looking to pay CalGen creditors with Calpine stock, which may have a value well below the value of their claims when that stock is ultimately distributed.

HSBC and The Bank of New York also said since Calpine's proposed Chapter 11 plan lumps creditors of CalGen together with creditors of the other Calpine entities for voting purposes, the CalGen creditors have no vote on the substantive consolidation plan and no independent fiduciary who has negotiated or reviewed that plan with their interests in mind.

According to the motion, Calpine's argument for substantive consolidation is that the financial accounting of its subsidiary debtors is "hopelessly entangled."

However, although Calpine said it could not sift out separate financial statements for the individual debtors, it actually did file a 10-Q for CalGen in February.

A hearing is scheduled for Sept. 25.

Calpine, a San Jose, Calif., power company, filed for bankruptcy on Dec. 20, 2005. Its Chapter 11 case number is 05-60200.

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